Following a recent decision of Chinas Shenzhen’s Municipal Intermediate People’s Court, Apple may see the demise of their iPad sales along with the bar on their exportation from China.
The court ruled that Chinese company Proview Technology Shenzhen, part of Proview International Holdings (Hong Kong) was the true proprietor of the trade mark in China and all previous assignments made to a UK agent on behalf of the US giant were unlawful. Proview attained the rights in the mark in relation to their all in one internet terminal of the same name, almost a decade before Apple began launching their product. Evidently, using the term ‘Trademark Squatter’ seems highly derogatory for the goodwill of the Chinese company.
Apple’s claim to the trade mark has arisen following an assignment made in 2009 from Proview Electronics Co Ltd (Taiwan), the second affiliate to the holding company, to a UK agent IP Application Development Company Ltd. The assignment was valued at around $55,000 and included two marks for the iPad that had been registered in China back in 2001 to the Shenzhen affiliate. By omitting simple due diligence checks, as part of their acquisition strategy, the success of one of the companies most valuable assets (the iPad trade mark) will be diminished since just searching for the proprietor on the Chinese Register would have revealed the true owner.
Under Chinese Regulations governing the assignment of trademarks, a general assignment form should have been completed and filed by Apple immediately without assuming its validity and going ahead with the launch regardless. If Apple had filed the assignment form and the necessary counterparts, the office would have informed them of the negligent rights claimed to ownership and attempted to correct the problem, as opposed to refusing the delayed assignment since proprietary rights lay with the Shenzhen affiliate.
Despite the assignment actually conveying ownership to Apple, the court took the view that it was impossible to assign that which it did not own. Even if the assignment was made by an affiliate partner and the holding company had knowledge of early negotiations, Shenzhen had never been privy to the negotiations or agreed to their undertaking. By implication the general rule of thumb is that a company cannot be bound by a contract that divulges their property rights to third parties unless they have been privy to the consultations.
The battle continues and Proview Shenzhen has since attacked Apple in court proceedings claiming that the iPad should never have been sold in China without the full rights to ownership. Consequently, Proview are looking to obtain compensation of around $1.5 billion for the Chinese sales of the infringing devices. In addition, Proview and their US counterpart have filed a complaint to a Californian court alleging fraud against the corporate giant since they created an agent in the UK without disclosing that the sole purpose was to acquire the Chinese marks.
As one of the world’s largest and highly reputed companies has suffered the wrath of Chinese trade mark laws, all companies must now be on notice regardless of size or reputation and become educated as to the dangers of international markets and seek advice and protection accordingly.